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August 7th, 2007
In August of 2007, there was a hult in activity in three hedge funds that specialized in US mortgage debt. This is a saving deficit because these people "paying" the mortgages were spending money that they didn't have which is what caused so much debt. -
Housing Crisis
Putting a down payment on a house can be very expensive and the government realized this so the sub-prime lending arose. This allowed people who couldn't afford the normal mortgage or down payment, to pay little to nothing for a house. This caused inflation throughout the economy and falls under the leadership deficit because the government was enforcing this sub-prime lending. -
Banks Creating Securitization
Banks were borrowing even more money, buying securities, loaned more money, and banks liike the Lehman Brothers were getting into mortgages in and buying them to securitize banks. This is a banking deficit because in order to make these banks secure, more money was being spent to buy the loans that the US debt kept increasing, -
Bernard Madoff Scheme
Bernard Madoff defrauded several of his investment clients of $15 billion. He was then sentenced to 150 years in prison because he could not meet his obligations. This falls under the monetary policy because he took money from investors without their permission.
Picture URL: http://www.iliketotellstories.com/uploaded_images/Bernie_Madoff_3_BW.jpg -
Walstreet Crash
Investment banks on Walstreet began to crash because corprate fraud and a sub-prime mortgage crisis was evident. This event falls under the savings deficit becacuse the US government had to jump in a pay a lot of money just to save these banks from going bankrupt.
Picutre URL: http://www.conservapedia.com/images/thumb/5/58/CRASH08.JPG/330px-CRASH08.JPG -
Reserve Primary Fund
The Reserve Primary Fund adds to a substantial amount of money loss which led to problems for the commercial paper market, a key source of funding for corporations, which suddenly could not get funds or had to pay much higher interest rates. -
Bailing Out Other Countries
The US agreed to help bail out other countries, like Greece, along with the assisstance of the UK and other European countries. These bail outs caused a world credit loss of $2.8 trillion. The UK and the other European countries spent $2 trillion and more is expected to be spent. This goes with the saving deficit because the government is using US money to help other countries out when the US has an imense amount of debt. -
Public Sector
The IMF announced that it would help Greece out with their financial debt. This caused the budget deficits to skyrocket mainly because of the low tax reciepts.
